Australia’s Landslide Election Still Yields Gridlock

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The Commonwealth’s election calendar ticked off another big one this month, this time in Australia, as Prime Minister Anthony Albanese and his Labor party claimed victory in May 3’s federal contest, winning 34.6% of the vote.^[i] Like Canada a week prior, this marks a massive comeback after Labor polled behind the opposition Liberal-National Coalition (LNC) under Peter Dutton for more than a year. Labor won a majority in the House of Representatives, but not the Senate, preserving bullish gridlock—a fine outcome for stocks, in our view, which should benefit from low legislative risk and falling uncertainty ahead.

This was a significant turnaround. Albanese and Labor trailed Dutton and the LNC since March 2024, fitting a global anti-incumbency wave that ousted sitting leaders in the US, UK, Canada, France and Japan.^[ii] Yet the tide turned in late March, as Albanese and Labor surged shortly after Treasurer Jim Chalmers introduced a friendly pre-election budget featuring tax breaks for millions of Australians.

But that budget doesn’t seem solely, or even really largely, responsible. There was a bigger factor at play: As in Canada, US President Donald Trump seemingly held huge influence. Numerous pundits and politicians compared Dutton’s proposals on issues like immigration and energy production with Trump’s—echoing what happened with Canadian Conservative leader Pierre Poilievre. When tariffs hit headlines bigtime early last month, it seems to have swung popularity quite a bit. Albanese’s opposition, like new Canadian Prime Minister Mark Carney’s, seemingly rallied voters.

Officials are still tallying votes, but the results confirm Labor’s majority in House, though not in the Senate. Five Senate seats remain undetermined, but no single party will reach the 39 seats required for a majority, meaning Albanese and Labor lack the power to unilaterally pass legislation. This likely tees up a confidence and supply agreement with the Greens, Australia’s third-largest party, which has more ideological overlap. As things stand, Labor will likely need 9 of the Greens’ 11 senators to sign off on potential legislation. This wasn’t the clean sweep victory headlines suggest.

Still, pundits hype Albanese’s supposedly strong mandate, suggesting the win opens the door for his administration to “fix” Australia’s economy with big, growthy legislation. This includes key Labor agenda items like expanding Medicare, increasing housing supply and reducing living costs.^[iii] Some tout Albanese’s ability to push these through, citing a more one-sided government this time around. His prior government needed the Greens’ support and three “bench crossers,” or votes from other parties, but the latter is no longer required.

Yet all this speculation overlooks some notable disagreements with Greens. Consider Labor’s flagship policy goals: On Medicare, Labor have outlined pledged A$8.5 billion to improve billing rates and medical professional training, A$1 billion for mental health initiatives and A$644 million to open 50 new urgent care centers.^[iv] The Greens are pushing for more sweeping changes on this front, like Medicare fully covering dental and mental health and ensuring free general practitioner visits at 1,000 new clinics—all funded by taxing big corporations. That may not mesh with what seems to be Labor’s tax-cutting mood.

On housing and cost-of-living issues, Labor is focused on increasing housing supply and making it easier on first-time homebuyers, allocating billions to new property construction and easing lending conditions. Yet here, too, the Greens’ proposals don’t wholly overlap. Their goals include winding back tax discounts for real estate investors, implementing a rent freeze and establishing both a national renters protection agency and government-owned property developer to supply affordable homes. This would represent significant stat intervention, which doesn’t quite mesh with Labor’s incentive-based proposals. Outside of this, the two parties also diverge on key issues like taxes, immigration and environmental policy.^[v]

We have seen this movie before—not in Australia, but in Europe, where center-left parties in Portugal, Spain and elsewhere needed support from smaller populist parties to pass legislation in the late 2010s. Despite some big-picture common ideological ground, it resulted in very little passing. Conventional wisdom presumed it would pull legislation in more radical directions, undoing many of the reforms implemented during the eurozone crisis and reducing competitiveness, but it ended up in disagreements and stalemates. While not exactly the same, Canada’s Liberal government under Prime Minister Justin Trudeau faced a comparable scenario. It relied on the further-left New Democratic Party to stay in power and pass anything of note, and when the latter yanked that support last fall over policy disagreements, it triggered the Trudeau government’s collapse. Sometimes, confidence and supply agreements yield much less-than-expected on the policy front.

Hence, gridlock Down Under looks likely. On balance, that looks positive to us. While gridlock frustrates voters, it lowers the risk of government policies picking winners and losers, interrupting free markets and raising uncertainty among Australian businesses. Yes, it does also mean widespread hopes for big fiscal stimulus may prove lofty. But that is probably fine, given Australia’s economy was already in fine shape—see five consecutive quarters of GDP growth.^[vi] As for stocks, by throwing sand in the gears, gridlock helps sap negative surprise potential. The Greens’ targeted concessions have been well-known, public information for months. Stocks have had plenty of time to pre-price their potential effects—they aren’t sneaking up on anyone.

Moreover, stocks should benefit from falling political uncertainty ahead. While Australia’s new government is basically set, more clarity awaits post-budget. Labor made their goals clear in March, but the Greens’ negotiations likely draw the process out. Still, a deal will eventually get done, giving Australian businesses a lay of the land—allowing them to factor in any upcoming legislative changes and move forward with investment plans or other business operations. This additional clarity, plus underappreciated gridlock, should be tailwind for stocks.

Another takeaway? This marks two major anglophone elections featuring massive swings away from “Trump-connected/right-leaning” parties in their closing weeks. This is something to note ahead of 2026’s US midterms, as it may be an early warning shot for Republican congresspeople and senators.